Credit cards are almost a necessity in today's society. It has
become harder and harder to get through life without plastic.
If you want to make purchases over the Internet, guarantee a
hotel room, or perform a wide variety of other financial
transactions, a credit card is essential. And, the truth is,
credit cards can be a valuable financial tool, provided you
manage them effectively.
All credit cards are definitely not created equally and the
first step to effective credit card management is shopping
around for the right card in the first place. The factors to
take into consideration are interest rates, annual fees, other
fees, grace periods and aspects like cash back or other rewards
for using the card.
Interest Rates
One of the incentives credit card companies use to try to get
customers to choose their card over all the others floating
around is to offer a special introductory interest rate. An
introductory rate sounds good, but can be a trap for the
unwary. Generally, the customer opts for the low introductory
rate, runs up the charges on the card, and is not able to pay
the card off by the end of the introductory period. That's when
the 'after-introductory' rate kicks in, and you find yourself
paying from 12-20% on your credit card debt. When you are
interest rate shopping, you also need to make sure that the
interest rate won't take a substantial jump if you are late
with a payment. Some companies bump the interest rate if your
payment is even a day late, and the change is permanent. You
don't ever go back to the lower rate.
Fees
Be sure to read the fine print. Credit card issuers have gotten
fairly ingenious about hiding a variety of fees that the casual
consumer, who doesn't bother to read all of the credit card
details, may end up paying and not even be aware. Annual fees
are fairly straightforward. There are cards that charge annual
fees just for the privilege of carrying the card, and there are
others that don't charge annual fees at all. An annual fee is
not necessarily bad, depending on the perks that go along with
it. If there are none, don't bother with cards that charge an
annual fee. On the other hand, if you have no credit history or
a bad credit history, you may have to get a card with an annual
fee, and use it until you can qualify for a different one. In
most cases the annual fee can be rolled into the monthly
payments and doesn't have to be paid up front, although that is
not always the case.
Watch out for hidden fees like closure fees. Some companies
actually charge you for closing your account. The only way to
avoid closure fees are to carefully read all of the credit
card's terms and conditions before accepting it and make sure
that no such fee is attached.
Late fees can be charged when your payment is late, sometimes
even as little as one day late. These fees can vary, but again
are disclosed in the credit card terms, so at least you are
aware and can avoid them by keeping your payments current.
If you travel, beware of overseas transaction fees. Some card
issuers have begun to charge a 1-2% fee off the top for using
the credit card overseas.
Grace Periods
If you plan on paying off your balance in full each month to
avoid incurring any interest fees, make sure your card has a
grace period that allows you to do so. Some cards begin
charging interest at the time of purchase. In that case, even
if you pay off your balance every month, you will still end up
paying interest to the credit card company. Make sure there is
a grace period on your card - that's the amount of time you
have before you start incurring interest charges and it's
usually something like 25-30 days. Be sure to read the card
disclosures carefully so you will know if there is a grace
period during which you pay no interest, or not. If you don't
pay off the balance of your account each month, grace periods
really don't make too much difference because you will be
paying interest anyway.
Other Benefits
Some credit cards offer additional benefits for using their
card - things like airline miles or a percentage of cash back
on all your purchases. If you travel a great deal or routinely
use your credit card for all purchases and then pay them off
before the end of the month, these can be valuable additions.
However, be sure to read all of the fine print and make sure
the perks aren't costing you more in fees and interest than
they are worth.
If you can't get by without a credit card, and very few of us
can in this day and age, at least be aware of all the different
types of offers that exist and choose the one that will benefit
you most in the long run.
About The Author: Max Hunter is the author of many credit
related articles. If you are looking for help with Payday loan
or any type of faxless loans please visit us at
http://www.PaydayLoanChoice.com
